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Blackberry Attracts Interest From Fairfax

The ailing smartphone giant Blackberry has agreed to a deal with its largest shareholder Fairfax Financial (currently owning about 10% of the stock) for £3 bn

The deal is by no means complete and Blackberry have even stated they will "continue to explore other options while negotiations with Fairfax continue." Blackberry have signed a letter of intent agreement in which a consortium led by Fairfax Financial has offered to aquire the company subject to due diligence. it is expected this process of "diligence" will be completed by early November.

This comes after Blackberry announced 4,500 job cuts last Friday which many believe to be a radical short term solution to curtail losses. It's unclear what the consortium's plans for BlackBerry would be. BlackBerry said that it plans to focus on the enterprise and specifically security and mobile device management.

Canadian billionaire Prem Watsa, Fairfax's chairman and chief executive, said: "We believe this transaction will open an exciting new private chapter for Blackberry, its customers, carriers and employees.

"We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company with a focus on delivering superior and secure enterprise solutions to Blackberry customers around the world."

"We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees. We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company with a focus on delivering superior and secure enterprise solutions to BlackBerry customers around the world."

Brian Colello, analyst at Morningstar, said that taking Blackberry private would allow the company to reorganise without being under the glare of Wall Street investors.

He said: "Based on the company's disastrous earnings warning on Friday, I think a deal had to happen and the sooner the better. This is probably the only out for investors and the most likely outcome.

"The benefit to this sort of takeover is the ability for Blackberry and the consortium to reinvent the company without public scrutiny. It appears that the end game is going to be whether Blackberry can emerge as a niche supplier of highly-secured phones to enterprise customers and governments."

Jan Dawson, chief telecoms analyst at Ovum has the following comments, "Taking BlackBerry private doesn't solve the fundamental problems at the company. First, the company's device sales are cratering, and its announcement last week that it no longer intends to pursue the consumer market is essentially the death knell for this business. BlackBerry's supply chain relies on scale for profitability, and it will never again be able to achieve the scale necessary to make money on devices. It's likely that BlackBerry will be out of the device business entirely by the middle of next year. The next challenge is that BlackBerry's other businesses are all to a greater or lesser extent dependent on its devices business. BlackBerry Messenger's installed base is entirely on BlackBerry devices, and its launch on iOS and Android was aborted over the weekend. It's mobile device management business is entirely based on its ability to manage BlackBerry devices, and its cross-platform management is much less well established than those of major competitors like MobileIron and Airwatch. If you strip out BlackBerry's use of its QNX operating system for BlackBerry devices, you're left with a business that's worth less than $100 million. About the only part of BlackBerry that looks to be worth a significant amount at this point is its patent portfolio, and that certainly wouldn't justify the purchase price on its own."

Blackberry shares, which fell 17% on Friday after its jobs cut announcement, rose just over 1% on Monday.